Fintech Titans Surge Back: PhonePe, CRED Resume Rental Payments After Mastering RBI's Compliance Maze

Fintech Titans Surge Back: PhonePe, CRED Resume Rental Payments After Mastering RBI's Compliance Maze​

Fintech powerhouses PhonePe and CRED are set to reintroduce rent payments via credit cards after successfully developing a stringent marketplace platform model. The companies, expected to launch the service within the next month, have addressed past regulatory concerns that forced most platforms to discontinue this lucrative segment of their business.

The relaunch represents a major pivot for the Indian fintech landscape. This move ensures strict adherence to Reserve Bank of India's (RBI) guidelines, particularly concerning the use of credit cards in P2P transactions.

The Relaunch and the Marketplace Platform Design​

After previous service stoppages, PhonePe and CRED are bringing back rent payment functionality by adopting a dedicated marketplace model. This design is critical to fulfilling the regulator’s requirements regarding contractual relationships between transacting parties.

The companies have significantly reinforced their verification processes for both the payer and the payee. These enhanced measures include mandatory collection of PAN cards for both parties, alongside verified rent agreement documents.

This stringent process directly addresses the fundamental concern from regulators: that credit cards are primarily intended for person-to-merchant transactions. The marketplace model effectively mandates that landlords must be treated as merchants, thereby subjecting them to stricter merchant KYC norms.

Navigating Regulatory Concerns and Industry Precedents​

The original hesitation by fintech firms stemmed from RBI's tighter Payment Aggregator (PA) and Payment Gateway (PG) guidelines, issued on September 15. These guidelines restricted PAs from conducting payments for entities with whom they lack a direct contractual tie.

For the Indian payment ecosystem, rent payments represented a significant revenue stream. PhonePe, in its UDRHP, had disclosed that exiting the business caused it a revenue hit estimated at around Rs 1,250 crore.

Several firms, including RedGiraffe and NoBroker, have long operated under this marketplace structure. These companies, by integrating compliance upfront, proved the viability of treating landlords as merchants within their systems.

Historical Friction: The Volatile State of Rent Payments in Fintech​

The industry saw intense shifts regarding rent payment acceptance throughout 2024. In March 2024, several major fintechs including PhonePe, Paytm, Mobikwik, Freecharge and Amazon Pay halted accepting rent payments through credit cards.

These stoppages occurred following the RBI's tightened guidelines. However, some platforms resumed service by integrating additional KYC and compliance checks for users.

The friction point originated from the nature of P2P transfers being routed as rent payments using credit cards. The RBI was concerned about creating regulatory and compliance risks through this process.

Business vs Personal: A Growing Necessity in the Modern Economy​

Payment firms have argued that the increasing prevalence of independent professionals, freelancers, and consultants in the corporate world makes individual payments a common reality. Discontinuing all payments to individuals via credit cards could severely disrupt this growing segment of the economy.

While some earlier payment platforms had successfully tweaked their processes to resume these transactions, the overall market witnessed volatility. In June 2024, HDFC Bank even notified credit card holders that rent payments through fintech apps would incur a fee of 1 percent up to Rs 3,000 per transaction.